Southern Energy Corp. Announces Second Quarter 2025 Financial and Operating Results and Information Regarding the Annual Meeting of Shareholders

Executive Summary

• Southern Energy Corp. reported its second quarter 2025 financial and operating results, highlighting a 3% increase in petroleum and natural gas sales to $4.0 million, driven largely by a 61% surge in natural gas pricing compared to Q2 2024.
• The company successfully completed the second of four high-quality drilled uncompleted horizontal wells (DUCs) from its Q1 2023 program, the GH Lower Selma Chalk (LSC) 13-13 #2 well, which was completed safely and under budget.
• Southern closed a $5.0 million equity financing in April 2025 and converted $3.1 million in convertible debentures into equity, strengthening its financial position while maintaining a net loss of $0.4 million for the quarter.

Key Details

• Financial Performance (Q2 2025):
  • Petroleum and natural gas sales: $4.0 million (up 3% from $3.9 million in Q2 2024).
  • Net loss: $0.4 million ($0.00 per share basic and diluted), compared to a net loss of $2.6 million in Q2 2024.
  • Adjusted Funds Flow from Operations: $0.6 million ($0.00 per share basic and diluted).
  • Six-month sales: $9.1 million; Six-month net loss: $4.3 million.
• Production Metrics:
  • Average production: 11,295 Mcfe/d (1,883 boe/d), a 27% decrease from Q2 2024.
  • Production mix: 96% natural gas.
  • Average realized prices: $3.63/Mcf for natural gas and $62.60/bbl for oil (vs. $2.26/Mcf and $80.06/bbl in Q2 2024).
  • Natural gas premium: Achieved an average premium of $0.19/Mcf (~6%) above the NYMEX HH benchmark.
• Operational Updates (GH LSC 13-13 #2 Well):
  • Completed in June 2025; first 30-day average production was 3.6 MMcfe/d (99% gas).
  • Production rates are over 100% higher than the average of original LSC horizontal wells drilled by previous operators.
  • Completion involved 25 fracture stages with 5.3 million lbs of proppant (70% increase in intensity vs. first-generation completions).
  • Completion cost: $2.2 million, which is over 10% below pre-job estimates.
  • Water flowback rates are over 70% less than Upper Selma Chalk wells, resulting in ~$0.20/Mcfe in initial operating cost savings.
• Capital Markets & Financing:
  • April 8, 2025: Closed equity financing raising $5.0 million gross proceeds via 102,482,673 new units.
  • April 8, 2025: Converted remaining convertible debentures ($3.1 million) into 62,759,286 new units and issued 1,627,170 new units for accrued/unpaid interest.
  • Hedging: Fixed-price swap of 5,000 MMBtu/d at $3.40/MMBtu through December 2026.
• Regulatory & Future Outlook:
  • FERC Dispute: Working with FERC to resolve transportation dispute causing shut-in of ~400 boe/d from Mechanicsburg and Greens Creek fields; resolution expected in Q3 2025.
  • Future Plans: Two additional high-quality DUCs remain in Gwinville; company will monitor pricing and well performance before deciding on completion timing.
  • Outlook: Expect new volumes to materially enhance Q3 2025 cash flow; constructive outlook for natural gas pricing into late 2025 and 2026.

Notable Quotes

• Ian Atkinson, President and CEO: "Southern continued to build momentum through the second quarter of 2025, supported by firming natural gas prices and the successful completion in late June of the GH LSC 13-13 #2 well in our Gwinville field, marking a key milestone in the redevelopment of our LSC inventory. Early flowback results are highly encouraging and we are particularly pleased to have completed this well at 10% below our original budget, accelerating expected payouts and reinforcing the economic viability of our broader development program."
• Ian Atkinson, President and CEO: "Looking ahead, we expect these new volumes to materially enhance our Q3 2025 cash flow profile. With a constructive outlook for natural gas pricing into the back half of 2025 and into 2026, combined with two additional high-quality DUCs, a deep inventory of drilling opportunities and ongoing capital discipline, Southern is well-positioned to deliver meaningful shareholder value through the remainder of the year and beyond."